Double hit looms for doctors, hospitals

If Jan. 1 comes around with no fiscal cliff deal, the doctors and hospitals who take Medicare patients are going to get dinged twice — once by sequestration, and again by the lack of a “doc fix.”

It’s an industry that has gotten all too accustomed to Congress letting big cuts go through, only to fix them retroactively. In the past few years, more than one cut in the Medicare physician formula has gone into effect, only to be patched up later.

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But this time, the stakes are much larger — and health care interests are deeply intertwined with the bigger political battles on Capitol Hill.

Going over the fiscal cliff would result in a 2 percent cut in payments to Medicare providers and private Medicare Advantage plans under sequestration. And if a “doc fix” isn’t passed along with a fiscal cliff deal, physicians and hospitals would face a 26.5 percent cut in pay for treating Medicare patients. Other smaller segments of the health industry, such as ambulatory services and rehabilitation therapies, would face cuts, too.

Even if the big issues in the fiscal cliff — the Bush-era tax cuts and sequestration — remain unresolved by Jan. 1, the health industry has some confidence that the cuts to Medicare’s Sustainable Growth Rate payment formula will be undone — eventually.

“But that doesn’t mean we won’t have a mess on Jan. 2,” said Robert Laszewski, president of Health Policy and Strategy Associates, a consulting firm. “That’s going to be a real problem.”

The Centers for Medicare & Medicaid Services has already told health providers of the impending cut but indicated that payments would not immediately be processed with the cut in effect. In the past, CMS has held payments while Congress sorted out a patch to prevent the cut.

But that confidence that Congress would get it done eventually wouldn’t last forever.

“If we’re having this conversation on March 2, that might be a different story,” said Eric Zimmerman, a partner at the international law firm McDermott Will & Emery.

Several physician groups are urging Congress to address the Sustainable Growth Rate separately this year if a fiscal cliff deal does not come together before the end of the year. But it seems unlikely.

“These things are going to have to be packed into a larger deal,” Zimmerman said. “There may be consensus around not allowing physician payments to fall, but there is no consensus around how to pay for it.”

The entire health sector would get hit by the fiscal cliff — but the doctors stand to lose the most, the fastest. The sequester makes a 2 percent cut to their Medicare payments, but that’s dwarfed by the 26.5 percent cut if Congress fails to pass a doc fix.

“That’s tens of thousands of dollars [in lost Medicare revenue],” said Jeffrey Cain, president of the American Academy of Family Physicians.

The group sent a letter to its members this week outlining the impact those cuts would have: $27,000 for the average family physician, and $80,000 for the average practice of three primary-care doctors.

By Dec. 31, Cain said, doctors will have to decide whether to participate in Medicare, “and it will be influenced by whether there is trust or not.”